Who pays when someone without insurance shows up in the ER?

The question is important as Republicans debate health care legislation that could result in more than 20 million fewer Americans having health insurance in ten years.

Author:
Maureen Groppe , USA TODAY , TEGNA

Published:
7:47 PM EDT July 3, 2017

Updated:
4:55 PM EDT October 19, 2017

If an uninsured patient shows up in the emergency room, who pays? The hospital? Taxpayers? The patient? Other patients?

The question is important as Republicans debate health care legislation that could result in more than 20 million fewer Americans having health insurance in ten years. If that happens, some people will go without care. Others will show up at hospitals, but won’t be able to pay their bills.

The year the Affordable Care Act passed, hospitals provided about $40 billion in "uncompensated care" — that is, care they were not paid for. That was nearly 6% of their total 2010 expenses.

A 1985 federal law requires emergency departments to stabilize and treat anyone entering their doors, regardless of their ability to pay.

But that doesn’t mean the uninsured can get treated for any ailment.

“There’s lots of medical care we want to consume that’s not an emergency,” said health care economist Craig Garthwaite, an associate professor and director of the health care program at Northwestern University's Kellogg School of Management.

It also doesn’t mean that hospitals won’t try to bill someone without insurance. And the bill they send will be higher than for an insured patient because there’s no carrier to negotiate lower prices.

As a result, the uninsured are more likely to be contacted by collection agencies, as they face problems paying both medical and non-medical bills. One study, published in 2016 by the National Bureau of Economic Research, found that someone who goes into the hospital without insurance doubles her chances of filing for bankruptcy over the next four years.

For the bills that go unpaid, hospitals can try to compensate by charging other patients more. But that doesn’t happen as much as many people – including policymakers -- think.

The authors of the ACA believed that increasing insurance coverage through Medicaid and subsidies for private insurance would lessen the cost-shifting that leads to higher insurance premiums. Supreme Court Justice John Roberts also mentioned that benefit in the 2011 decision he authored upholding the law’s constitutionality. But researchers haven’t been able to document much of a cost shift.

Studying the effects of expanding Medicaid in Michigan – where more than 600,000 gained coverage – researchers at the University of Michigan have found no evidence that the expansion affected insurance premiums. They did, however, document that hospitals’ uncompensated care costs dropped dramatically – by nearly 50%.

Conversely, when Tennessee and Missouri had large-scale Medicaid cuts in 2005, the amount of care hospitals provided for free suddenly increased. In a 2015 study published by the National Bureau of Economic Research, Garthwaite and his co-authors estimated every uninsured person costs local hospitals $900 in uncompensated care costs each year.

“This is not a trivial thing for a hospital to deal with,” Garthwaite said. While hospitals average 7% profit margins, uncompensated care costs can be more than 5% of revenue.

Hospitals do get help with the unpaid bills – from taxpayers.

The majority of hospitals are non-profits and are exempt from federal, state and local taxes if they provide a community benefit, such as charitable care. Hospitals also receive federal funding to offset some of the costs of treating the poor.

The ACA scaled back those payments in anticipation that hospitals' uncompensated care costs would go down. The GOP proposals to overhaul the ACA would reinstate the payments, while making changes to Medicaid and private insurance subsidies that the nonpartisan Congressional Budget Office estimates would result in more than 20 million fewer people having insurance by 2026.

The return of extra federal payments to hospitals for uncompensated care wouldn’t be enough to offset the unpaid bills, according to an analysis by the Commonwealth Fund. The study examined the Medicaid changes included in the bill that passed the House in May, and co-author Melinda Abrams said the effects of the Senate’s pending proposal would be at least as great.

Hospitals’ operating margins in all states would decline. And hospitals in most of the 31 states which expanded Medicaid under the ACA would have negative operating margins by 2026, according to the analysis.

“Ultimately, you have to cut services, fire people, or both,” Abrams said. “It is shifting the burden of the cost. What is currently shared between the federal government and state governments will be shifted largely to the states. And the burden will be felt by the providers, the patients, the community and the taxpayer.”

Pressure from hospitals was often a factor in states’ decisions to expand Medicaid under the ACA. In some states, such as Indiana, hospitals even agreed to a pay new taxes in exchange for the additional federal revenue from Medicaid patients. Most of the recent decline in hospitals’ uncompensated care costs has been in states which expanded Medicaid.

And hospitals are among those fighting hard against GOP efforts to phase out the expansion and cap overall Medicaid payments to states.

“If these proposed cuts take place, devastation would occur for local rural economies due to hospitals closing and patients incurring huge amounts of debt,” Trampas Hutches, CEO of Melissa Memorial Hospital in Holyoke, Colo., said at one of the many events organized by the American Hospital Association and other health care providers in opposition to the GOP bills.

One reason Medicaid has been harder to cut than other safety-net programs – such as welfare cash payments – is that a large part of the spending is a transfer to health care providers, Garthwaite argues. That’s particularly true for hospitals which are essentially “insurers of last resort” when there are large coverage gaps.

“When policymakers decide not to provide health insurance for a portion of the population that otherwise could not afford insurance," Garthwaite and his colleagues wrote in their 2015 analysis, "hospitals ultimately bear the cost of that decision,”